Thread by @ProfPaulPoast

🇦🇷 on the verge of another debt default (👇) raises a question: why do countries default on their sovereign debt? Is Argentina unusual?

Well, international relations scholars have something to say about this!

[THREAD]

https://twitter.com/ProfPaulPoast/status/1169327720930717703

To be clear, I'm focusing on default, not the rates or terms of borrowing (which, of course, are closely related to default risk). One of the most recent pieces on that subject comes from @thwillow, @goodhouses, & Cameron Ballard-Rosa in @BJPolS

rwellhausen.com/uploads/6/9/0/…

And one of my favorite pieces on this topic is this one by @EBeautifulPlace, Sebastian Saiegh, & Gary W Cox in @IntOrgJournal

cambridge.org/core/journals/…

The literature on sovereign defaults themselves, especially on external lenders (hence, why it is an IR subject), is huge. To get up-to-speed on the state of the literature as of 2013, check out this @AnnualReviews of Economics piece by Tomz and Wright

annualreviews.org/doi/full/10.11…

Key word in that title is "empirical": debt and default (like any financial topic) is data rich. My favorite exploration of the historical data on debt and default comes from @carmenmreinhart & @krogoff in their 2008 @PrincetonUPress book

books.google.com/books?id=ak5fL…

So what does the empirical literature presently have to say about why countries default on external debt?

There's a fair amount of VERY recent work on the topic!

@degal & @patrickshea_ps have a forthcoming Journal of Conflict Resolution piece about "Debt restructuring" (when a gov't doesn't flat out stop paying, but basically gets creditors to agree to accept a less money in repayment)

journals.sagepub.com/doi/abs/10.117…

But when it comes to "flat out default", a good recent account is this @PrincetonUPress book by @JeromeRoos:

books.google.com/books?id=WzV8D…

What is nice about Roos' book is that it flips the question: not "why default?" but "why don't we see more of it?" After all, given the lack of a "global bankruptcy court", aren't government's free to say, "forget it?" 🤔

For me, Roos answer is generally similar to Mike Tomz in his 2007 @PrincetonUPress book -- states are scared to default because their dependence on capital means they need to keep creditors happy (that means maintaining a "reputation" for repayment)

books.google.com/books?id=Td6ug…

This hearkens further back to a classic piece by Wallerstein and Przeworski

cambridge.org/core/journals/…

Sometimes default is due to, well, guilt by association. This is what can spur contagion, as explored by @sarahbauerle, @whinecough, & @thoatley in this relatively recent @PoPpublicsphere piece

cambridge.org/core/journals/…

And the desire to avoid "guilt by association" was the basis of Julia Gray's @CambridgeUP book

books.google.com/books?id=LbX1A…

An interesting angle to consider with defaults is whether it is "moral" or "ethical". This is tackled by Gabriel Wollner in this recent The Journal of Political Philosophy piece

onlinelibrary.wiley.com/doi/full/10.11…

On a personal note, I've always been fascinated with how states borrow during wartime and whether they repay those debts after the war.

The role of debt in war financing (and how it compares to other means of raising funds) is expertly covered by @rosellacappella in her @CornellPress book!

books.google.com/books?id=c45HD…

In this APSR piece, Branislav Slantchev says that states basically default after wars, especially if they lose

cambridge.org/core/journals/…

@patrickshea_ps & I say, "well, not really" -- win or lose, states tend to continue paying debt

journals.sagepub.com/doi/abs/10.117…

What does this all mean? Well, anarchy makes it seem likely that states will default early and often -- but that's simply not the case. Most states pay back most of their debt most of the time!

Hence, Argentina is actually VERY unusual in this regard.

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